Significant Improvements in Energy Efficiency Characteristics of the US Housing Stock

by Elizabeth
La Jeunesse
Research Analyst

Compared to 2009, single-family homes built before 1980 are now better insulated, have relatively newer heating equipment, and are more likely to have undergone an energy audit. These and other energy-related characteristics of the owner-occupied stock, shown in Table 1, are consistent with the expanding size of the home improvement industry over the past few years, with particular growth in energy-sensitive projects. Homeowners' annual spending for related projects—including roofing, siding, windows/doors, insulation and HVAC—expanded from $50 billion to nearly $70 billion over 2009-2015.



The transformation of the existing US housing stock toward greater energy efficiency also reflects a wave of energy-related incentives for HVAC and building envelope upgrades put in place following the rise of energy prices in the mid-2000s. At the federal level, one of the biggest initiatives was the Obama administration’s American Recovery and Reinvestment Act of 2009, which extended and strengthened tax credits for energy improvements to existing homes, including insulation, windows, roofs, water heaters, furnaces, boilers, heat pumps, and central air conditioners.

Despite recent progress, there is room for growth. As of 2015, 17 percent of single-family homes built prior to 1980 were still reported to have ‘poor insulation’, and only 11 percent had received an energy audit. By comparison, a recent profile of newly constructed homes (built after 2009) showed only 1 percent of residents reporting ‘poor insulation’—an impressively low share. Moreover, nearly 90 percent of new homes come with double- or triple-pane windows. Bringing older homes up to this higher standard will require significant investments to the existing stock.

At the same time, only 5 percent of new homes have smart thermostats—a relatively inexpensive but potentially high-payoff upgrade—and a similar share have energy-saving tankless water heaters. These lower shares suggest room for growth in energy-efficient technologies in new and old homes alike.

Renewable technologies, particularly solar energy, are also showing signs of growth. As of 2015, nearly 6 percent of recently built homes reported on-site solar generation, a relatively small share, but nearly triple the incidence in older homes. Thanks to the Consolidated Appropriations Act of 2016, US taxpayers can still claim a credit of up to 30 percent of expenditures for photovoltaic and solar thermal technologies placed in service in their homes. Several US states also now provide consumers with credits for net excess energy generation, further increasing the payoff for installing renewable energy systems.

With recent declines in energy prices, however, there is some question of whether homeowners still have strong incentives to pursue energy-efficiency improvements. Since 2015, the consumer price index for energy has hovered around 10 percent below its average for the prior ten years (2005-2014). If this trend continues, further progress in energy-related improvements will probably depend even more on consumer preferences and finances, in addition to changing building and product codes, and evolving industry standards. 

Data used in this analysis comes from a newly released 2015 Energy Information Administration survey that tracks the energy-related characteristics of all US residential units. Further results detailing energy consumption intensity (or usage per square foot) will be released in 2018, enabling deeper analysis into the evolution of energy efficiency in US homes.

New Report: Aging Homeowners Drive Growth in Remodeling as Millennials Begin to Gain Footing

Homeowner spending on remodeling is expected to see healthy growth through 2025, according to Demographic Change and the Remodeling Outlook, the latest biennial report in our Improving America’s Housing series. Demographically based projections suggest that older owners will account for the majority of spending gains over the coming years as they adapt their homes to changing accessibility needs. Although slower to move into homeownership than previous generations, millennials are poised to enter the remodeling market in greater force, buying up older, more affordable homes in need of renovations.

The residential remodeling market includes spending on improvements and repairs by both homeowners and rental property owners, and reached an all-time high of $340 billion in 2015, surpassing the prior peak in 2007. [See our Interactive Infographic.] Spending by owners on improvements is expected to increase 2.0 percent per year on average through 2025 after adjusting for inflation, just below the pace of growth posted over the past two decades, and about on par with expected growth in the broader economy.

The large baby boom generation has led home improvement spending for the past twenty years, and its influence shows no signs of waning. Older homeowners will continue to dominate the remodeling market, as they make investments to age in place safely and comfortably. Expenditures by homeowners age 55 and over are expected to grow by nearly 33 percent by 2025, accounting for more than three-quarters of total gains over the decade. The share of market spending by homeowners age 55 and over is projected to reach 56 percent by 2025, up from only 31 percent in 2005.

Gen-Xers are now in their prime remodeling years, and while some are still recovering from home equity losses after the housing crash, many in this generation will undertake discretionary projects deferred during the downturn. And as younger households move into homeownership, they will supplement the already thriving improvement market.

Try the Interactive Infographic

“With national house prices rising sufficiently to help owners rebuild home equity lost during the downturn, and with both household incomes and existing home sales on the rise, we expect to see continued growth in the home improvement market,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies.

Even though increasing house prices are encouraging homeowners to reinvest in their homes, they also are raising housing affordability concerns among younger buyers. Climbing mortgage interest rates and rising house prices not only make homeownership more difficult for younger households, but leave those who are able to buy with fewer resources to make improvements and repairs. And while high rents may provide an incentive to buy homes, they also make it difficult for first-time buyers to save for a downpayment.

Some demographic trends are also presenting challenges to a healthier remodeling market outlook. A disproportionate share of growth over the coming decade will be among older owners, minority owners, and households without young children; groups that traditionally spend less on home improvements.

“Despite these challenges, the remodeling industry should see numerous growth opportunities over the next decade,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “Strong demand for rental housing has opened up that segment to a new wave of capital investment, and the shortage of affordable housing in much of the country makes the stock of older homes an attractive option for buyers willing to in invest in upgrades.”

Finally, as a new generation of homeowners enters the remodeling market, specialty niches focused on energy-efficiency, environmental sustainability, and healthy homes are likely to see significant growth. Home automation—encompassing everything from entertainment systems to home energy management, lighting, appliance control, and security—is also emerging as a strong growth market, particularly among younger households.

Looking ahead, there are several opportunities for further growth in the remodeling industry. The retiring baby boom generation is already boosting demand for accessibility improvements that will enable owners to remain safely in their homes as they age. Additionally, growing environmental awareness holds out promise that sustainable home improvements and energy-efficienct upgrades will continue to be among the fastest growing market segments.

Read the full report, try the Interactive Infographic, or join the conversation on Twitter with #HarvardRemodeling.

What Can We Learn from Attempts to Reduce the Cost of Affordable Housing?

by Sam LaTronica
Gramlich Fellow

Midwestern CDCs trying to build affordable homes that do not require development subsidies have identified three potentially promising strategies: building smaller homes, utilizing factory-built homes, and creatively designing houses to get more out of them. In a new working paper that grows out my work as an Edward M. Gramlich Fellow in Community and Economic Development I conclude that while each technique presents opportunities for cost savings, each also comes with its own set of challenges.

The fellowship, which is co-sponsored by the Joint Center for Housing Studies and NeighborWorks^® America, also expanded my horizons because for years, my conception of new “affordable housing” had been limited to the standard multifamily properties developed in larger urban areas. This was the type of affordable housing I had seen since moving to the Boston area, as well as working for an affordable advocacy organization in the San Francisco Bay Area prior to attending the Harvard Graduate School of Design.

As a Gramlich Fellow in the summer of 2015, I was exposed to a new region and new approach to affordable housing. The Midwestern CDCs, which were part of NeighborWorks^® America’s national network, often had in-house general contractors and focused on building and selling affordable single-family homes, in both urban and rural areas. Given the dearth of housing subsidies, particularly subsidies for affordable housing in rural areas, these CDCs were trying to find cost-saving construction techniques that would allow them to build affordable housing without development subsidies.

The Rambler, a single-family home constructed by the Southwest Minnesota Housing Partnership. The home is 1,092 square feet on the main floor with another 1,092 square feet of unfinished basement space that can be converted into living space or more bedrooms at a later date. This home was constructed in 2014 with an asking price of $153,900.

Through reading popular literature on home construction, analyzing building trends, conducting interviews with CDC leaders, and visiting new developments in the Midwest, it became clear that CDCs were interested in pursuing three potential cost saving techniques: building smaller homes, using factory-built homes, and creatively designing houses to get more out of them.

Smaller homes are theoretically cheaper to build because they simply require fewer materials and less construction time. Once occupied, these houses not only can be cheaper to heat or cool but also will cost less to maintain. Smaller footprints also make it possible to build these homes on smaller or irregularly shaped lots, which helps expand the options for CDCs.

However, cost savings are not always realized when buildings are smaller. Once land and other development costs are factored in, it is possible that building smaller homes will be only slightly cheaper than building larger homes on the same lot. Moreover, the marginal cost of constructing a few hundred more square feet might allow the CDC to sell the house for more money while still keeping it affordable. Some CDC leaders also worry that producing affordable homes that are much smaller than new market-rate homes would create obvious distinctions between income levels and stigmatize the people living in the new, smaller homes. Finally, while building smaller can be smart for a number of reasons, most people still want bigger homes as evidenced by the fact that average house sizes have been increasing and have recently surpassed pre-recession levels. This suggests that without a shift in the overall market, smaller homes may not be a particularly appealing option for CDCs trying to build affordable housing.

While factory-built construction techniques are not necessarily new, they are new to many CDCs. Many Midwestern CDCs are currently experimenting with (or exploring the possibility of using) both modular homes and homes made from structural insulated panels (SIPs). Factory-built homes have the benefit of being produced mostly indoors and using assembly line techniques, which can significantly reduce onsite construction time and protect against weather delays, theft, vandalism, etc. Moreover, homes built in factory-controlled settings can be tighter and more energy efficient and make more efficient usage of building materials (which should reduce their cost).

Like building smaller, however, the cost savings that are touted in popular literature are harder to realize in practice. If CDCs, architects, contractors, and subcontractors do not have enough experience working with factory-built housing, then the development process can hit major roadblocks that negate the hypothetical cost savings that would result from a shorter construction period and lower production costs. In fact, some CDCs that experimented with these techniques ended up with homes that cost far more than they would have cost using traditional stick-built techniques.

Finally, creatively designing houses can supplement the previous construction types to get the most out of new homes. This can come in many forms. Designing attached accessory dwelling units will add more units to the housing stock and can supplement the primary tenant’s income.  Co-housing development can utilize scale and reduce the per-owner development costs. Open floor plans can make smaller homes more palatable and unfinished buildouts can reduce costs while allowing families to later customize their home to meet their particular needs.

In the end, there is no silver bullet that can be used to build affordable single-family homes without a development subsidy. However, there are many techniques that, when combined, could produce significant cost savings. CDC leaders interested in pursuing these approaches should remember that the benefits of these techniques, as described in popular literature, do not always materialize in practice. Therefore, CDC leaders should learn from others who have already experimented with them. They should also establish strong relationships with architects and contractors who have experience with these techniques, so that they reduce the likelihood of delays that would drive up costs. Hopefully, by persevering and learning from others, the CDCs can increase the production of affordable homes.

Sam LaTronica, who graduated from the Harvard Graduate School of Design in 2016, was a 2015 recipient of the TheEdward M. Gramlich Fellowship in Community and Economic Development, which is co-sponsored by NeighborWorks®America and the Joint Center for Housing Studies.

Energy Consumption in the Residential Rental Sector, and Promoting Energy Efficiency

Elizabeth La Jeunesse
Research Analyst

With the recent release of our America’s Rental Housing report, as well as the landmark international agreement on climate change reached in Paris, we took the opportunity to revisit the question of how much energy is consumed by the residential rental sector, as well as to explore pathways to reducing energy usage by renter households. We will revisit this topic again with the release of the US Energy Information Administration (EIA)’s 2015 Residential Energy Consumption Survey (RECS). Meanwhile, here are a few facts about renters' energy usage, as well as ways renters' energy consumption can be reduced even further.

The residential housing sector has a sizable carbon foot­print, accounting for about 22 percent of national energy consumption and a similar share of energy-related domestic CO₂ emis­sions (source: EIA website.). While the rental sector’s contribution to these emissions is smaller than the homeownership sector both in aggregate and on a per household basis, it nonetheless represents a sizeable share of residential energy consumption. According to results from the most recent Residential Energy Consumption Survey in 2009, renters were responsible for nearly a quarter of all residential energy use. On a per-household basis, renters living in single-family homes consumed 19 percent less energy than owner-occupants, while renters living in multifamily units consumed 29 per­cent less energy than owner-occupants. This lower energy use among renters reflects in part the smaller average size of rentals relative to owned units. However, while the 2015 RECS is not yet available, the updated data is likely to show higher ener­gy use by the rental sector because of increases in both the rentership rate and the share of single-family rentals.

The construction of new, more energy efficient units and loss or replacement of older units contribute to improvements in the energy efficiency of the rental stock over time. Based on our analysis of data from the 2009 RECS survey, we found that rentals built in the 2000s consumed 28 percent less energy on average than those built before 1980. Figure 1 below illustrates this trend, showing that newer single-family and multifamily rental units consume less energy compared to remaining, older units.


Figure 1

Note: Single-family excludes mobile homes.
Source: JCHS tabulations of US Energy Information Administration, 2009 Residential Energy Consumption Survey

However retrofits to existing units, especially those affecting the building envelope, windows/doors, appliances, and HVAC systems, also play an important role—and have more immediate impacts. As of 2009 the typical unit built before 1970 used nearly 25 percent less energy than same-age rentals in 1980. This substantial reduction in energy usage over time highlights the critical importance of retrofits to existing units for improving energy efficiency.

Figure 2

Note: Includes all structure types. Square footage includes all attached garages, all basements, and finished/heated/cooled attics.
Source: JCHS tabulations of US Energy Information Administration, 1980 and 2009 Residential Energy Consumption Surveys.

A variety of government and private initiatives currently target reductions in energy use in the rental housing sector. In particular, state and local building codes for energy efficiency provide a primary source of new regulations. These are influenced by changes in the International Energy Conservation Code (IECC), which continues to set higher standards for energy efficiency requirements in the building envelope, lighting, heating, and cooling. Federal appliance standards for equipment in residential/multifamily buildings are also tightening. Since 2009, fully 34 new or updated standards have been issued for products, estimated to cover 90 percent of residential energy use (source: US Dept. of Energy). Federal, state and local financial incentives, including tax deductions and credits, utility rebates and loan programs, also target reduced energy usage in rental properties.

In his research brief, "Reducing Energy Costs in Rental Housing," JCHS Senior Research Fellow  Michael Carliner highlights the pros and cons of these and other initiatives to reduce energy usage among renters. One emerging approach that bears particular promise is that of increasing access to energy usage information and related property performance data among renters and property owners. The idea is that greater transparency of energy cost information can incentivize renters and landlords alike to manage their energy consumption choices more efficiently, and to undertake cost-effective, energy saving investments. Energy usage data can even be ‘gamefied’ such that people voluntarily compete in the common effort to save energy—with real energy savings as a result (see ACEEE paper). For some examples of city-wide efforts to increase disclosure access to energy usage data, see Amy Morsh’s recent blog post at the Center for Climate and Energy Solutions.

While increasing access to information can help overcome market inefficiencies, major complications and trade-offs still remain in the quest to reduce renters’ energy consumption. With rental affordability challenges high and rising nationwide, one major question is whether property owners are passing the costs of energy-saving retrofits on to tenants. Structural feasibility is also a potential concern, since new appliance standards are not always compatible with what existing multifamily buildings can structurally accommodate in terms of HVAC sizing. Lastly, as discussed in the America’s Rental Housing report, efforts to improve the energy efficiency of the rental stock must also consider the location of rental housing units, which influences tenants’ travel options and transportation-related energy usage.

As the preceding discussion suggests, reducing renters' energy usage is a complex task with many possible ways forward, but also with many potential challenges and trade-offs. Ongoing and future efforts to improve the energy efficiency of the US rental stock ideally will take these complex factors into account, while balancing other critical policy objectives including rental housing affordability.

New Report: U.S. Home Improvement Industry Outpaces the Broader Housing Recovery

In the aftermath of the Great Recession, the U.S. home improvement industry has fared much better than the broader housing market, according to our new report. Emerging Trends in the Remodeling Market. While residential construction is many years away from a full recovery, the home improvement industry could post record-level spending in 2015.

A number of factors have contributed to the strengthening remodeling market: following the housing bust, many households that might have traded up to more desirable homes decided instead to improve their current homes; federal and state stimulus programs encouraged energy-efficient upgrades; and many rental property owners, responding to a surge in demand, reinvested in their properties to attract new tenants.

Additionally, with the economy strengthening and house prices recovering, spending on discretionary home improvements (remodels and additions that improve homeowner lifestyles but which can be deferred when economic conditions are uncertain) rose by almost $6 billion between 2011 and 2013, the first increase since 2007.

Improvement spending, however, has not been evenly distributed across the country. Homeowners in the nation’s top 50 remodeling markets accounted for a disproportionately large share—nearly 60 percent—of overall improvement spending. Thanks primarily to their higher incomes and home values, owners in metro areas spent 50 percent more on improvement projects on average than their non-metro counterparts in 2013 (see interactive map).  

The remodeling industry also faces a radically different landscape than before the recession. “After years of declining revenue and high failure rates, the home improvement industry is, to some extent, reinventing itself,” says Kermit Baker, director of our Remodeling Futures Program. “The industry is finding new ways to address emerging growth markets and rebuild its workforce to better serve an evolving customer base.”

Looking ahead, there are several opportunities for further growth in the remodeling industry. The retiring baby boom generation is already boosting demand for accessibility improvements that will enable owners to remain safely in their homes as they age. Additionally, growing environmental awareness holds out promise that sustainable home improvements and energy-efficient upgrades will continue to be among the fastest growing market segments.

Millennials, however, are the key to the remodeling outlook. “The millennials’ increasing presence in the rental market has already helped lift improvement spending in that segment,” says Chris Herbert, managing director of the Joint Center. “It’s only a matter of time before this generation becomes more active in the housing market, supporting stronger growth in home improvement spending for decades to come.”

Download the full report, infographic, and media kit.

Join the Twitter conversation with #HarvardRemodeling 

Healthy Housing Today: A View from the National Healthy Homes Conference

by Mariel Wolfson
Meyer Fellow

This Spring, I attended the National Healthy Homes Conference in Nashville, Tennessee. The three-day conference attracted over 1,000 attendees, including more than 150 speakers who presented on a wide variety of topics, and was jointly organized by the U.S. Department of Housing and Urban Development (HUD) and Rebuilding Together, a national nonprofit organization that provides critical home repair services to low-income homeowners. From asthma interventions in low-income housing to the latest lead-abatement technologies to green architecture, the conference’s range of educational sessions reflected the diversity of today's healthy housing field. But before I describe today's healthy housing "scene,” let me provide a brief background.

The modern American healthy housing movement has its origins in late 19^th-century New York City, when reformers worked to improve the unsafe and unsanitary living conditions in tenement buildings, particularly for immigrants living on the city’s Lower East Side (conditions famously captured by the photographer Jacob Riis in his book How the Other Half Lives, published in 1890 and pictured below). In 1901, the Tenement House Act outlawed the severe overcrowding and fire hazards endemic to these buildings, and required such basic "amenities" as toilet facilities and windows providing natural light. These housing-focused reforms coincided with the emergence of public health as a professional discipline in the United States (the American Public Health Association was founded in 1872 and its core publication, the American Journal of Public Health was first published in 1911). Thus, interest in the relationship between housing and health has a long and rich history.

A second major healthy-housing turning point in the United States came in the winter of 1973–1974, with the OPEC oil embargo. Although perhaps most memorable because of the long lines it caused at gas stations, this fuel shortage had a lasting impact on the typical American home. Newly built houses achieved unprecedented "tightness" and energy savings. However, they were soon found to have high levels of indoor pollutants, especially combustion pollution from heating and cooking, formaldehyde, and radon. As a result, scientific research into residential indoor air quality began in earnest in the mid-1970s, with the goal of keeping homes both healthy and energy-efficient. The post-oil embargo preference for energy-saving homes did not create the problem of indoor air pollution; we’ve had pollutants in our homes for as long as we’ve been heating them and cooking indoors. But the zeal for saving energy did exacerbate some indoor pollution problems and – most important – it catalyzed scientific, popular, and governmental concern about indoor air.

Since that time, knowledge of indoor air quality has expanded exponentially. But as multiple conference speakers emphasized, we still have a lot to learn and accomplish, and we are now also focused on newer issues, such as the effects of climate change on our homes, pest management, asthma prevention, and recent technologies to save energy and manage pollutants. Below, I've outlined what I consider to be five salient themes of the conference:

1. Old hazards persist.

Lead paint, banned in 1978 but still present in older homes, is a “classic” healthy-housing problem that has been the focus of government attention for decades and remains a pressing issue affecting Americans at all income levels. Similarly, combustion pollution and radon, two of the major pollutants on the original IAQ research agenda of the mid-1970s, are still significant contributors to indoor air pollution. (You can learn more about combustion pollution from cooking and help Berkeley Lab researchers by completing a citizen science survey.) Even as scientists and the public grow increasingly aware of important new hazards (such as endocrine disrupting chemicals) it is important to remember that we have not eliminated older threats.



2. Healthy housing is about more than IAQ.

Indoor air quality is one vital aspect of healthy housing, but is not the definition of healthy housing. For many Americans, issues of basic safety are more immediate. According to Rebuilding Together, 2.6 million low-income homeowners live in structurally unsafe homes. Other concerns are best described as problems with “indoor environmental quality.” For example, as we explored in an as-yet unpublished Joint Center survey of homeowner concerns, noise and light pollution may not be getting sufficient attention. Finally, some conference sessions emphasized the role of neighborhoods in shaping healthy housing. This includes such factors as pedestrian-friendliness, access to exercise facilities, and access to healthy food. In fact, the conference’s motto was “leading the nation to healthy homes, families, and communities.” So, while IAQ is a rapidly expanding field of research with important implications for our homes, I am in favor of a more comprehensive and holistic definition of healthy housing.

3. The Ventilation Conundrum

Adequate ventilation is a requirement for any healthy home. Indeed, “well-ventilated” is one of the eight healthy-home criteria contained in HUD’s new Strategy for Action. But defining and achieving adequate ventilation is not always straightforward, as a home’s ventilation needs are influenced by many variables: number of residents, location, local climate, indoor pollutant sources, pressure changes in the home, and more. Both natural and mechanical ventilation are important: natural ventilation is the normal movement of air in any building, through its envelope, doors and windows; mechanical ventilation takes many forms, including kitchen and bathroom exhaust fans, and a variety of heating and cooling systems that aim to control temperatures while conserving energy. Henry Slack, of the United States Environmental Protection Agency, cited research demonstrating improved decision-making performance among office workers and school children when buildings were well-ventilated, but explained that while the EPA has studied numerous ventilation technologies and strategies, the Agency does not have a “prescription” for achieving healthy IAQ.  In 2003, the American Society of Heating, Refrigeration, and Air-Conditioning Engineers (ASHRAE) introduced its much-debated Standard 62.2 for airflow in residential buildings, but debate continues surrounding the standard’s applicability and utility. Architect Peter Pfeiffer reminded all of us that the goal for any house is “healthy air,” not simply adherence to the ASHRAE standard.  Achieving optimal ventilation, he explained, really is a “conundrum” that requires consideration of multiple variables, including a home’s location and its number of residents.

4. Behavior is a Crucial Factor in the Healthy Home

A home – whether a single-family detached suburban house or an urban apartment – is living and dynamic, its air quality changing in relation to occupant activities (such as smoking and use of chemical-laden furnishings and products), season of the year, and more. A consistent theme among conference presenters was that occupant behavior can trump any technological innovation, even the most sophisticated, energy-efficient heating and cooling system. Residents who are uncomfortable with their home’s temperature and do not understand how to use a new type of thermostat, for example, will prevent it from functioning as intended. Building professionals at the conference commented that some state-of-the-art heating/cooling systems require frequent and expensive maintenance, which is yet another obstacle to their adoption and effectiveness. Engineers and designers need to be aware of installer and user needs when creating the next generation of home technologies: technology alone is not enough, and humans are unpredictable!

5. Reasons for Optimism: Healthy Housing is a National Priority

I was impressed with the number and diversity of organizations and individuals working to ensure safe and healthy homes for Americans of all income levels. From the Federal to the local level, there is significant interest in and commitment to, in the words of the conference organizers, “utiliz[ing] housing as a platform for improving the quality of life.” This indicates a desire to go beyond the basics of lead-abatement and pest control, and to promote housing where families can thrive, not just survive. This approach is reflected in the government’s new Strategy for Action on healthy homes, developed by the interagency Healthy Homes Work Group and presented by former HUD Secretary Shaun Donovan in his plenary address.

Although the conference brought together an impressively diverse group of people, organizations, and topics, I believe we can still identify two general movements:

One – Bringing substandard American homes up to a basic level of safety and protecting children from persistent hazards like lead poisoning. One major facet of this movement focuses on public housing, and protecting its residents from serious health hazards like tobacco smoke. However, plenty of privately-owned homes are also in serious need of repair.

Two – It is clear that many Americans who already live in safe and seemingly healthy homes are concerned about the increasing number of chemicals we use in building, furnishing, and cleaning our homes, especially as we learn more about the long-term consequences of exposure to endocrine disruptors and other hazards. Creating a non-toxic (or less-toxic) home is one way to reduce our overall exposure to environmental risks, and I expect that we will see much more interest in this in the coming years and decades.

Photos 2 & 3 courtesy of Rebuilding Together

Energy Cost Burdens in Rental Housing

by Michael Carliner
Fellow

The recent Joint Center report, America's Rental Housing: Evolving Markets and Needs, reiterates the extent of severe cost burdens faced by renters, especially those with low incomes.  A research brief I prepared in connection with the report documents the large share of the cost of rental housing attributable to the cost of energy, particularly for low-income renters.

Among renters who pay for all utilities, payments for energy represented a median of 13 percent of gross rents (rent plus utilities).  Energy expenses are nearly as high for low-income renters as for high-income renters, and consequently account for larger share of gross rents and of incomes for those with low incomes. Median monthly energy expense for those paying all utilities in 2011 was $116 for those with annual incomes of less than $15,000, compared to $151 for renter households with incomes over $75,000 (Figure 1).  This partly reflects the fact that energy use is a necessity, but it is also due to lower energy efficiency in the housing occupied by low-income renters.

(Click chart to enlarge)

Values shown for income, expenses, and energy use are medians
Source: American Housing Survey 2011

About a quarter of renters have some or all of their utilities included in their rent. For those renters, the cost of energy may not be visible, but it represents a major component of the operating cost for their housing, and tenants ultimately pay that cost with their rents.  Even where renters pay directly for energy used within their individual units, energy costs for common areas and facilities are a substantial component of the operating cost for the property and are reflected in rents. Among all multifamily rental properties, payments for energy by property owners represent about 9 percent of rent receipts.

Rental housing generally uses more energy, relative to living area, than owner-occupied housing. Newer homes are generally more energy-efficient than older ones.  Energy use per square foot is particularly high among the nearly 7 million multifamily rentals built before 1960 (Figure 2).  There has been substantial investment in older owner-occupied housing over the years to improve efficiency, but not as much for multifamily rentals.  Older single-family rentals, many of which were owner-occupied in the past, use less energy per square foot than older multifamily rentals, but still use more energy per square foot than owner-occupied single-family homes.

Data in thousands of BTUs
Source: DOE Energy Information Administration, 2009 Residential Energy Consumption Survey

For the majority of renters who directly pay for the energy used in their homes, the amount used reflects the quality of insulation in the structures and on the efficiency of the equipment. Efficiency depends on investments made by the owners of the properties, who may not be motivated to invest in efficiency improvements if they don't pay the bills for usage.  This separation between investment decisions and usage costs has been described as a "split incentive" situation and is a central issue in renters' energy costs. Another type of split incentive arises when the owner pays the bills but the tenant controls the temperature and the lights.

My research brief discusses several policy options for overcoming the split incentive problem where the tenants pay for utilities.  These include regulations mandating energy efficiency and subsidies for investments in efficiency.  The most promising approach, however, may be to make energy efficiency more transparent, so that renters can easily anticipate energy cost in choosing where to live.  If that makes occupancy rates and rental income more dependent on efficiency, property owners would have a greater incentive to invest in efficiency.  Several localities have recently established requirements for benchmarking and disclosing energy expenses in rental properties, providing a test of whether that will lead to an easing of renters' energy cost burdens.

Split incentive problems are not the only source of energy inefficiency and excessive energy cost burdens in rental housing.  The research reported in the brief, and earlier research cited there, indicates that in rental properties with utilities included in the rent, where the owner has a greater incentive to invest in efficiency, insulation quality and equipment efficiency is not consistently better than in rentals where the tenant pays for utilities, once variables such as regional climate and age of the structure are accounted for.  Whether or not utilities are included in the rent, rental housing does not generally include efficiency characteristics comparable to owner-occupied housing.  Other factors are evidently also involved.  The paper suggests, for example, that the financial resources of rental property owners may be a constraint.  Moreover, government programs such as the DOE Weatherization Assistance Program are designed in such a way that assistance goes primarily to owner-occupied housing, even though the low-income households that are the intended beneficiaries are mostly renters.

Beyond Energy Efficiency: The Future of Sustainability in the Housing Market

by Kermit Baker
Director, Remodeling
Futures Program

For the past 40 years, since the OPEC oil embargo in the early 1970s dramatically pushed up international crude oil prices, energy conservation and energy efficiency have been national economic and policy priorities. Households have directly borne the brunt of these higher prices. Since 1973, while overall consumer prices have increased fourfold, housing costs as measured by the consumer price index have moved up at the same pace, but home energy prices have jumped by half again as much; six times as high as they were in 1973.

In response to higher prices, households have reduced their home energy consumption. The initial reaction was to cut back on heating in the winter and air conditioning in the summer, but as energy costs remained high, households have made investments to improve the energy efficiency of their homes. (A recent blog post by Mariel Wolfson describes how early efforts to address energy efficiency gave rise to concerns about indoor air quality.)  More recently, state and federal tax incentives have encouraged even greater levels of home energy efficiency spending. Joint Center analysis indicates that almost a third of homeowner improvement spending at present is for projects where there is likely to be an improvement in energy efficiency, such as window replacements, adding insulation, or upgrading the HVAC system. This share is up from a quarter of spending a decade ago.

The results of these investments have been impressive: between 1980 (when households started thinking more seriously about investing in energy efficiency retrofits) and 2009 (the most recent national survey on energy consumption) per household energy consumption has declined almost 22%. Since home sizes have actually increased over this three decade period, the per square foot decline in home energy use has been an even more impressive 30%.

However, given changes in the domestic energy situation, the days of strong incentives from rising energy costs to improve home energy efficiency are likely behind us. While the controversy surrounding the environmental and health concerns of hydraulic fracturing have generated a lot of discussion, its impact on energy production generally has attracted less attention. For example, a 2012 report from the International Energy Agency predicts that the U.S. will become the largest global oil producer by around 2020, becoming self-sufficient in net energy terms later that decade and a net oil exporter by 2030. We’ve already seen the impact of this increased production on home energy costs: since 2008, overall home energy prices have remained stable, while natural gas prices for home energy use have declined by a third.

If rising and uncertain home energy prices drove the interest in energy efficiency investments, then the expected stable prices moving forward should remove many of these incentives. Where does that leave sustainability as a priority for homeowners? In fact, growing sensitivity to environmental concerns has created a lot of momentum behind energy efficiency as well as other sustainability concerns such as the use of renewable building materials and the use of recycled products in the homebuilding and home improvement process, water conservation and reuse, indoor air quality and healthy homes, home automation, and even renewable energy sources. Beyond the third of expenditures on energy efficiency measures noted above, Joint Center surveys of home improvement contractors have determined that somewhere between 20% and 25% of home improvement projects on a dollar basis have environmental sustainability other than energy efficiency as a stated goal of the project.

If consumer demand exists for increasing sustainability in housing, the likelihood is that the market will respond, and there is evidence that it is doing so. Entrepreneurs are developing new products in these areas. A recent Joint Center survey of home improvement contractors asked if they were seeing new products or technologies related to sustainability emerge in recent years, and if so, in which areas. Despite declining energy costs, energy efficiency and insulation techniques still topped the list, with about half of respondents indicating that they were installing or seriously considering installing new products or technologies in these market niches. However, also high on the list were products and technologies related to other sustainability objectives. As manufacturers figure out ways to produce them in a cost-effective manner, and contractors receive training and market their skills at installing these new products, interest in these areas is unlikely to diminish regardless of what happens to home energy prices.

Climate Change and Indoor Air Quality: Lessons from the Energy Crisis of the 1970s

by Mariel Wolfson
Meyer Fellow

Current discussions of climate change do not often focus on housing. Unless large numbers of homes are destroyed or damaged by extreme weather events such as hurricanes, tornadoes, or wildfires, we rarely scrutinize the effects of our warming planet on our homes. However, environmental health experts argue that this must change. In 2010, the US Environmental Protection Agency asked the Institute of Medicine to study the relationship between climate change and indoor environmental health. The Institute convened an expert committee of professionals from a range of fields, including earth sciences, public health, medicine, architecture, and engineering. Ultimately, they produced a thorough report - nearly 300 pages - arguing that climate change “may worsen existing indoor environmental problems and introduce new ones.” For example, extreme weather events and flooding could increase dampness and humidity, leading to mold growth and chemical emissions from decaying building materials. Or, extreme heat and cold could increase power outages, exposing already-vulnerable populations to dangerous temperatures or to carbon monoxide emissions from portable generators. Finally, well-intentioned attempts at energy conservation, such as weatherization, retrofitting, or excessively tight new construction, could reduce ventilation to dangerously low levels, exposing occupants to indoor air pollutants (radon, VOCs, and more).

           

This final example - tight, energy-efficient building - has an instructive history. The Arab Oil Embargo of 1973-1974, memorable to many Americans because of the gasoline shortages it caused, was a turning point in residential construction. Everyone from Sierra Club President Theodore Snyder, to President Gerald Ford, to energy expert Daniel Yergin endorsed residential energy conservation as a promising, if partial solution to America’s energy crisis. From rural homesteaders to large developers, American builders eagerly pursued energy-efficient housing designs. This was a time of great enthusiasm for underground and earth-sheltered homes, alternative power sources such as solar and wind, and other housing experiments. While some now seem outlandish, other innovations from this era are now standard, such as continuous polyethylene vapor barriers. If you’ve ever seen a half-built house cloaked in Tyvek Homewrap, this is an innovation that dates to the energy crisis of 1973-1974. The ideal of the nearly-airtight, highly energy-efficient house became increasingly attractive to builders and buyers alike; the lower a house’s “air changes per hour” (ACH), the more it could promise in energy and cost savings.

Above: a “zero energy” Habitat for Humanity house produced in collaboration with the National Renewable Energy Laboratory. Denver, Colorado. The home is tightly constructed, super insulated, and uses solar energy for space and water heating. It also has a mechanical ventilation system to conserve energy while preserving indoor air quality. Photo credit: National Renewable Energy Laboratory Image Gallery

As residential energy conservation became a political and popular priority by the mid-1970s, the Department of Energy funded the Lawrence Berkeley National Laboratory in Berkeley, California, to establish an energy-efficient buildings research program. Scientists studying residential energy efficiency began to investigate concentrations of indoor pollutants in these impressively-sealed homes. Focusing on nitrogen dioxide (a product of combustion from cooking and heating), formaldehyde (a common organic compound in building materials and furnishings), and radon (dependent more on the geology of a house’s site than the house itself), they found alarmingly high levels of indoor air pollution in some energy-efficient homes.

With these troubling findings as motivation, the Berkeley Lab pioneered scientific study of the complex relationship between residential energy efficiency and indoor air quality, and sought to balance these two necessities in cost-effective ways. In my recent working paper, I examine a crucial period in this history: during the early 1980s residential indoor air quality went from an obscure academic subject to a source of national anxiety. The Federal government, the popular media, and the public became increasingly concerned that America’s houses - especially its newly-popular energy-efficient ones - were full of insidious poisons. The media often oversimplified the situation by portraying energy-conservation as the enemy of healthy indoor air, when in reality the relationship between the two was complicated.

Above: Sources of Indoor Air Quality (IAQ) problems, Lawrence Berkeley National Laboratory, Indoor Environment Department. Conventional and energy efficient houses alike can contain harmful indoor air pollutants if not properly ventilated. Climate change is likely to exacerbate existing IAQ problems and introduce new ones. Photo credit: National Renewable Energy Laboratory Image Gallery

Knowledge of energy-efficient building, indoor air quality, and their relationship has increased exponentially since the energy crisis of 1973-1974. However, the continual proliferation of new building materials and household chemicals makes it difficult, if not impossible, for even the most ambitious indoor air experts to keep up. As the Institute of Medicine’s committee concluded, climate change adds even more variables to an already complicated set of equations.

The experience of the 1970s offers valuable lessons as we face the defining environmental problem of our time with an increasing sense of urgency. First, energy conservation in housing and other buildings is imperative, but can affect indoor environmental quality both negatively and positively. It might seem counterintuitive, but drafty old houses do not necessarily have better indoor air quality than tighter new ones: for example, well-insulated houses have the potential to burn less fossil fuel to maintain comfortable temperatures, thus releasing fewer combustion products and maintaining better indoor (and outdoor) air quality. Second, our homes are not isolated from the environments in which they are built: local, regional, and, increasingly, global conditions affect the longevity of housing and the quality of the indoor environment it envelops, which in turn affects the physical, mental, and financial health of occupants. Third, during the “environmental decade” of the 1970s, energy independence appealed to diverse sectors of American society for environmental, political, and financial reasons. This was a time of remarkable ingenuity in the residential energy sector. For example, the Federal government funded the Solar Energy Research Institute, the Department of Energy asked its National Laboratories to design energy-saving houses, major developers created conventional-looking homes that used thermal mass and solar power, and motivated Americans experimented with a variety of energy-saving strategies. Americans have a tradition of ingenuity in the face of energy crises, we have four decades worth of knowledge about indoor air quality and energy-efficient building, and we have a rapidly expanding knowledge of climate change. We can surely combine these advantages to ensure healthy homes on a healthy planet.

Are Renters Less Energy Efficient than Homeowners?

by Elizabeth La Jeunesse
Research Assistant

According to data from the Energy Information Administration, American renters use nearly a third more energy per square foot than homeowners. What accounts for this difference?

In part it’s because rental units are typically smaller, and are therefore more energy intensive. For example, a family in a small apartment needs a refrigerator, stove, and water heater the same way a family in a larger apartment (or a homeowner) does.  These things require a basic amount of energy, regardless of square footage.  Rental units also tend to be older; 75 percent of renters live in units built before 1990 while 68 percent of owners live in older units.

Source: US Department of Energy, Energy Information Administration, 2009 Residential Energy Consumption Survey.

That said, the above chart shows that the amount of energy used by renters can vary depending on whether their utility costs are fixed (built into their rent) or if they pay for utilities themselves.  As the chart illustrates, renters consume considerably more energy when some or all of their utility costs are fixed.  This shows the general tendency of people to consume more of something when there is no added cost for doing so. Such excess energy consumption drives up the amount of energy renters use overall, further accounting for the efficiency gap between owners and renters.  

Even so, renters who pay for utilities separate from their rent still use slightly more energy per square foot than owners.  This suggests a real, structural efficiency gap between rental and owner units. In fact, a recent study found that multifamily rentals in 2009 had 34% fewer energy efficiency features on average than other housing types. Consumer fuels and utility costs have risen over 50 percent over the past decade, outstripping overall inflation, which makes energy efficiency improvements (insulation, energy efficient windows, compact fluorescent lighting, HVAC upgrades, energy efficient appliances) appealing to people wanting to lower their energy bills.  But when tenants pay for their metered energy usage, a property owner’s incentive to perform energy efficiency retrofits is lower, since any cost savings will benefit the tenants, not the owner. Rental property managers also have less control over how their tenants respond to an energy retrofit (e.g. more efficient windows might still be left open in the winter).  These things can keep rental property owners from performing energy efficiency retrofits at the same rate as homeowners which, in turn, keeps energy usage by renters high.

The gap in energy usage between owners and renters suggests that there are real opportunities for savings through some combination of added incentives for property owners to make these investments in retrofits and greater incentives for tenants to conserve energy. Lowering energy use would have the additional benefit of bringing down the cost of rental housing at a time when more renters are paying very high shares of their incomes for housing as a new study by the National Low Income Housing Coalition shows.